Investors flock to neighbourhood shopping centres

Investors flock to neighbourhood shopping centresInvestors are seeking more opportunities in the shopping centre sector as Australia’s urban centres expand into new micro-communities. Demand, however, exceeds supply of quality stock and investor appetite will likely remain high in the near term, according to Savills. The humble neighbourhood shopping centre has emerged as a hot investment destination, with demand surging well above pre-GFC levels. The attraction hinges on market figures that demonstrate consistently that shopping centres play a key role in Australia’s small business and retail ecosystem, and are pulling their weight in delivering high yields. A survey from Urbis conducted last year found that collectively, Australia’s shopping centres produce a turnover of more than $110 billion per annum, representing about 40 per cent of total annual retail turnover.Sydney’s Westfield Bondi Junction alone accounts for just over $1 billion of that total, while Australia’s top 10 biggest centres combined yield around $9 billion per annum.According to Savills national director, Retail Sales, Steven Lerche, a lot of investment funds are chasing quality shopping-centre stock anchored by major supermarkets. “Shopping centres in high-density urban areas and convenience shopping have always been a stable investment,” Lerche notes. “That stability is centred on the inclusions of Coles and Woolworths, securing it as ‘anchor’ tenants, which provides solidity to long-term investments.”In a recent transaction, Savills negotiated the sale of privately owned Mt Warren Park Shopping Centre in the Brisbane-Gold Coast growth corridor for $14.35 million, representing a 7.0 per cent yield on fully let income. The Coles-anchored centre was offered to the market for the first time since it was developed in 2005.”This retail shopping centre sector, particularly in the new urban growth corridors, is experiencing unprecedented demand,” says Lerche. “For Woolworths and Coles, even if the supermarket is trading moderately, they won’t move out and let the competition come in. The supermarket battle is so competitive that they keep trading to keep their market share.”Lerche notes, however, that meeting this burgeoning demand could be a struggle, especially in rapidly expanding urban centres. In NSW, he says, those areas include emerging urban hubs such as Green Square, an expanding growth corridor that aligns with high-rise property development, urban renewal and public transport route extensions. “Retail spend is going up with real growth, and the drivers for investment demand in shopping centres include rental growth as well as yield. With interest rates still on the way down, investors will continue to look to the attractive yields that shopping centres provide,” he says.For more information click here.